Inflation - The Real Thing

"[T]he concept of the general price level is extremely vague and we cannot
even speak of a very approximate determination of the average price level.
Every index number is to a certain extent arbitrary: the selection of the commodities
that are to be included, the choice of the weighting, the base from which the
index starts, and, lastly, the mathematical processes applied, are all arbitrary..."

-Wilhelm Röpke, Crises and Cycles, 1936

As everyone not beholden to the current corrupt structure knows, prices are
rising at an unseemly pace. Röpke had it right. The corrupt structure
abuses the trust it is accorded by claiming "inflation is too low," then publishing
inflation figures not worth the paper they are printed on.

Although everyone knows prices are rising fast, there has not been, in general,
a rush to get rid of dollars, as there was in the 1970s. The rush was to buy
before prices went up. We are approaching a moment or period of recognition,
all the more predictable since incomes are flat to falling. Incomes rose through
the 1970s.

The backlash will open with revulsion towards government scrip (dollars) and
a rush to stuff will follow, particularly into gold and silver.

Without the slightest attempt to cover the waterfront, a portrait follows.

Flipping through a "What to Do" pamphlet when staying in New York, the price
for assaulting the Empire State Building, $25, struck an ill-tuned cymbal.

Over the post-millennial period, what served as the better conduit to save
or invest for the weekend getaway to New York? The S&P 500 peaked at around
1550 in March 2000 and is about 1660 today. Since 2001, gold (from around $300
to $1200) and silver (from about $4.50 to $19.00) did a better job of paying
the bills.

Sheehan serves as an advisor to investment firms and endowments. He is the
former Director of Asset Allocation Services at John Hancock Financial Services
where he set investment policy and asset allocation for institutional pension
plans. For more than a decade, Sheehan wrote the monthly "Market Outlook" and
quarterly "Market Review" for John Hancock clients.

Sheehan earned an MBA from Columbia Business School and a BS from the U.S.
Naval Academy. He is a Chartered Financial Analyst.